Cost, Insurance, and Freight, also known as CIF, is one of the 11 Incoterms coined by the International Chamber of Commerce (ICC) to ease international trade. The CIF Incoterm was updated in 2020 and is used for shipping maritime cargo. Learn more about CIF shipping, prices and insurance coverage and find out the meaning of CIF in import and export.
The CIF shipping term means that the seller is obligated to cover the cost, insurance and freight transport of goods to the named port of destination. The seller is responsible for clearing the goods for export, providing any type of documents or export licenses required for transport and packing the goods for transport. The buyer is responsible for unloading the goods at the port of destination, as well as for clearing the goods for import.
The CIF Incoterm is one of the 2020 Incoterms that is applicable only to sea freight.
The CIF Incoterms of 2020 determines the responsibilities of the seller and the buyer in an international sea cargo contract.
CIF INSURANCE COVERAGE
When using the delivery term CIF, the seller is responsible for adding insurance to the cargo. Usually, the CIF insurance coverage is based on minimum coverage. The final CIF cost includes the merchandise price plus 10% of the commercial value of the goods.
Although the CIF shipping term establishes that the seller must purchase insurance, the risk of the goods transfers from the seller to the buyer when they are loaded on the vessel at the port of origin. Until the goods are loaded on the vessel, the seller is liable for any loss or damages.
“CIF price” is quite a common term in international sea freight contracts. It is commonly used by exporters who also operate as freight forwarders because the seller is responsible for paying for the transport of goods under the CIF shipping term. The buyer will be invoiced for the commercial cost of the goods, plus shipping and insurance, without having to organise the transport themselves.
For example, a company in Ireland (the seller) sells 100k units of merchandise under CIF shipping terms to an American company (the buyer). The Irish company is responsible for arranging and paying for the transport, as well as covering the goods with basic insurance:
Following the Cost, Freight, and Insurance, the seller is responsible for clearing the goods for export, purchasing export licenses and paying any export fees.
The buyer is obligated to clear the goods for import at the country of destination and pay import duties and taxes.
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